Asian Stocks Due for a Fall?

By Ben Levisohn

‘Tis the season for selling Asian stocks? Not this year, says Credit Suisse.

The MSCI Asia ex-Japan Index has gained 17% this year-a nice return for investors who have stayed invested in the region.

But with the 2012 coming to a close, investors should be wondering whether it’s time to take some profits: In 2010 and 2011, Asian stocks lost at least 10% during the beginning of the year.

But Asian stocks have a lot going for them heading into 2013, Credit Suisse strategists say. For starters, foreign investors have not been rushing into Asia. They account for just 1% of market cap on a rolling 12-month basis for Emerging Asia, not including China. In 2010 and 2011 they accounted for 1.9% and 1.6%, respectively. The strategists say that anything above 1.5% would mean the market is overbought and at risk of a selloff.

Meanwhile, Asian stocks look cheap relative to the rest of the world-and their own history. They’re trading at a discount of 7% versus global stocks, and their price-to-book is currently 1.62x, not far from the 1.53x that has marked market bottoms in the past.

Their advice: Buy Asia’s stocks on the dip.

The iShares S&P 50 Index (AIA) exchange-traded fund is one way for investors to play the region. Be warned: It’s thinly traded, so investors should use caution when entering and exiting the fund.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.